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03/05/16

Colgate fined $18m for not being squeaky clean with detergent prices

On 28 April 2016, the Federal Court gave effect to a settlement reached between the ACCC and Colgate-Palmolive Pty Ltd (“Colgate”) in the ACCC’s laundry detergent cartel proceedings, ordering Colgate to pay a total penalty of $18 million. The penalty is the equal third largest penalty ordered in Australia for breaches of competition law (behind penalties paid by Visy and Qantas) and confirms the seriousness with which the ACCC and the courts view cartel conduct

Background

The laundry detergent cartel proceedings were commenced by the ACCC in December 2013 following an immunity application by whistle-blower Unilever in 2011. The proceedings were commenced against Colgate, Cussons and Woolworths and alleged that Cussons, Colgate and Unilever colluded to simultaneously move from selling standard concentrated detergents to ultra-concentrated detergents and to charge the same price per wash as the equivalent standard concentrated products instead of passing the cost savings onto consumers. The ACCC alleged that Woolworths was knowingly concerned in this conduct. The case against Cussons and Woolworths is listed for hearing in June 2016.

The penalty orders against Colgate were made following the parties providing to the court an agreed statement of facts and joint submissions on the appropriate penalty. In the agreed statement of facts, Colgate admitted to making, and giving effect to, an understanding with Unilever and Cussons that they would share with each other commercially sensitive information relating to the price of their laundry detergent products.

The court confirmed the appropriateness of the agreed penalty noting that it was significant but proportionate as the conduct was serious. In addition to the penalty, former Colgate sales director, Mr Paul Ansell, has been disqualified from managing corporations for seven years and ordered to pay a contribution of $75,000 towards the ACCC’s costs.

Next steps

The settlement with Colgate does not necessarily mean the ACCC’s case against Cussons or Woolworths will be any easier nor does it necessarily suggest a higher likelihood of Cussons and/or Woolworths being found guilty of the same conduct. As in previous cases,1 it is possible for the court to find against the existence of a cartel as defined in the relevant competition laws, even where some of the alleged cartel participants have already admitted to cartel conduct as part of an earlier settlement with the competition authority.

However, if Cussons and/or Woolworths continue to defend the proceedings and are ultimately found guilty of cartel conduct, Colgate’s substantial penalty is likely to cause some concern as to what is in store for them. The available penalties for cartel conduct includes an amount representing up to 10% of the relevant company’s Group turnover for the previous year. Colgate’s penalty of $18m was based on its turnover but also included a significant discount for cooperation, which would not be available if the matter is strongly defended in court.

What this means for you

The penalty confirms the increasing bite of competition laws as the ACCC seeks even higher penalties for breaches. In 2015, the ACCC Chairman warned that the ACCC would seek larger penalties than it had in the past to ensure that “businesses know the consequences for crossing the line” and labelled an $11 million fine ordered against Flight Centre (which was later overturned) “immaterial”. Businesses need to be ever more aware of their obligations under competition laws and ensure compliance through a carefully designed and implemented competition and consumer law compliance program. Additionally, Unilever’s protected position as immunity applicant highlights the value of ongoing compliance audits and the implementation of self-reporting mechanisms within the business.

1E.g. the Federal Court’s decision in the ACCC’s air cargo cartel case against Garuda and Air New Zealand– albeit, subsequently overturned by the Full Federal Court – and the decision by the UK’s Competition Appeals Tribunal in the tobacco cartel case.

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